Future of Solar Development in Latin America
Future of Solar Development in Latin America
Latin America and Caribbean on the Brink of Massive Solar Power Growth
As new markets emerge worldwide, IRENA’s latest report sees solar PV covering one quarter of global power by 2050
Lima, Peru, 12 November 2019 - Latin America and the Caribbean could grow their installed solar capacity by a factor of 40 by 2050, a new report by the International Renewable Energy Agency (IRENA) shows. Annual investmens exceeding seven billion would see the region's solar PV capacity rise from 7 gigawatts (GW) today, to more than 280 GW by mid-century. While solar energy remains the highest in Asia, North America and Europe, market growth is set to shift to other regions in the world. By that time, solar PV would represent the second-largest power source behind wind, generating a quarter of the world’s power, “Future of Solar Photovoiltaic ” launched today at “Sun World 2019” in Lima finds. In total, global solar power capacity would rise from 480 GW in 2018 to over 8000 GW by 2050, growing by nearly 9 per cent every year. “Solar PV and other renewables sources represent the most effective and ready solution for addressing growing energy demand and limiting carbon emission at the same time,” said IRENA’s Director-General Francesco La Camera. “Renewables are practical, affordable and climate-safe. They are key to sustainable development, enabling energy access, spurring economic growth, creating employment, and improving health. Particularly solar energy is set to become one of the most prominent power sources in 2050. Projected growth rates in markets like Latin America showcase that we can extend the energy transition to all countries. It’s possible.”
If accompanied by sound policies, the transformation driven by renewables such as solar can bring substantial socioeconomic benefits, IRENA’s new report finds. The global solar industry has the potential to employ over 18 million people by 2050, four times more than the 4.4 million jobs today. Similarly, the deployment of rooftop solar PV systems has increased extensively, which today makes solar PV in some markets more attractive than buying electricity from the grid. The competitiveness of distributed solar power is clearly raising deployment in large markets, including Brazil, China, Germany and Mexico.
- Accelerating solar PV can cut energy-related CO2 emissions by 21 per cent in 2050.
- With over 50 per cent of installed capacity in 2050, Asia (mostly China) would continue to dominate solar PV power, followed by North America (20%) and Europe (10%). The Latin American market would grow from 7 GW in 2018 to over 280 GW.
- Annual solar PV investment would have to increase by 68 per cent on average globally, from USD 114 billion in 2018 to USD 192 billion in 2050.
- Global levelised cost of electricity (LCOE) for solar PV will continue to fall from an average of 8.5 cents (USD 0.085) per kilowatt-hour (kWh) in 2018 to between 1.4 cents and 5 cents per kWh by 2050. A recent solar and wind power auction in Colombia was awarded for an average electricity price of 2.7 cents per kWh.
- Due to innovations, solar PV remains a fast-evolving industry. Floating PV is one of the most prominent examples with global cumulative installed capacity exceeding 1 GW in 2018. Battery storage and electric vehicles are key solutions to support the grid and manage high shares of solar PV as well as to guarantee the flexibility of the power system.
Now Is the Time for Latin America’s Renewable Energy Boom
As governments in Latin America scramble to deal with the fall-out of COVID-19, renewable energy should be top of mind as a possible pathway to economic recovery. Clean energy is increasingly viewed not just to reduce pollution, but as a means to improve public health and hedge against future climate risks and stranded assets. That idea has gained additional resonance considering the pandemic, and the region is particularly well-positioned to leverage the renewable industry as a source of new jobs and investment. But to succeed, governments will need to be proactive – and move quickly. According to the International Renewable Energy Agency (IRENA), many of the top markets for investment in renewable energy are in Latin America. The U.S. Department of Commerce, for example, previously ranked Brazil, Chile, and Mexico among the top markets in the world for U.S. firms and exporters of renewable energy and energy efficiency technologies. Meanwhile, the pandemic has accelerated an increased sustainability focus from policymakers and investors, as the downside risks of traditional energy supplies become more evident. Chilean institutional investors and the Santiago Stock Exchange, for example, have already begun to consider the principles laid out by the Task Force on Climate-related Financial Disclosure (TCFD), an initiative started in 2015 by the Financial Stability Board to enhance private-sector reporting on exposure to climate-based financial risks. Earlier this year the World Economic Forum's Global Risk Report ranked climate change and other related environmental issues as a top global risk – the first time in the survey’s history that the environment figured so prominently.
But Latin America has yet to make good on its potential. Recent regulatory roadblocks in Mexico for example, could negatively affect renewable energy projects worth $6.4 billion, supported in large part by foreign investors. European countries such as France and Germany have consolidated behind a “green recovery roadmap” considering COVID-19. However, stimulus packages in the region, such as in Chile, Colombia, Mexico and elsewhere, have focused on strengthening fragile healthcare systems and directing aid to the most vulnerable segments of the population. While staying connected to this reality is important, a longer-term economic recovery should place a greater emphasis on the role of renewable energy. A recent IRENA report detailed how massive investments in the renewable energy sector could unleash significant growth over the course of the next three decades, by returning between $3 and $8 on every dollar invested. Not only would the potential return on investment be good, but the labor market would also benefit, with estimates suggesting the total number of jobs in the sector could quadruple globally.
For the region, this would mean 3.2 million jobs, nearly 8% of the projected total under a green energy transformation. Further investments in energy efficiency, storage, and electrifying the transportation sector, all linked to establishing a cleaner energy system, could also have additional benefits for the Latin American job market. To get there, however, policies will need to support and incentivize a clean energy revolution by engaging diverse stakeholders and then uniting behind a common vision. Indeed, medium-and-long-term investments for renewable energy projects were already likely to become increasingly more common this decade. With an initial push from Columbia last fall, a coalition of Latin American and Caribbean countries pledged a target of 70% renewable energy use by 2030. The pledge was followed by the U.N. Conference on Climate Change in Madrid in December, where members of the Chilean Renewable Energy Association (ACERA) signed a cooperative agreement with 12 other energy associations from Latin America and Spain.
ACERA, the largest business association for renewable technologies in Chile, plans to coordinate efforts through the LberoAmerican Aliance for Renewable Energy, with eight other countries, promoting sustainability and decarbonization efforts in the electricity sector with partners in Argentina, Brazil, Colombia, Ecuador, Mexico, Peru, and Uruguay. This type of public-private partnership has tremendous buy-in across governments in the region, but it also needs backing in the form of finance from multilateral banks and U.S. investment firms. All of this reflects the fact that the world’s energy plans are changing rapidly, and that now is the time for Latin America to double down on its clean energy goals. For the first time on record, renewable power generation in the U.S. could surpass electricty generated by coal. This shows that for many economies, particularly those in the developing world, the dependence on electricity generated from dirtier sources of energy may not be the end-all solution for reaching economic development.
The benefits of acting quickly are clear. Cost-competitive and resilient renewable energy systems, such as solar and wind, are becoming feasible much more quickly than was previously forecast, as the effects of the pandemic play-out. As global supply chains become disjointed or disrupted, vulnerabilities in strategic sectors of the economy can have profound impacts on national security. Renewable energy, alongside innovative ways of redesigning utilities and integrating big data through smart technologies, can help to lessen potential supply disruptions and systemic threats to infrastructure. International financial institutions and investment firms are also playing a significant role, alongside the Federal Reserve and U.S. Treasury, to help reassure U.S. and global markets that amid all the coronavirus uncertainties, important monetary and fiscal tools remain available. A similar coordinated response may become necessary in addressing the financial aspects of climate change, by helping to direct greater investment to clean energy technologies. Large investment firms such as BlackRock have signaled more interest in understanding the financial risks associated with climate change. The firm’s chief executive, Laurence Fink, stated in his annual letter this year that the company would no longer invest in areas that represent a “sustainability-related risk.” The firm has in some ways become a major proponent of the TCFD, pushing to measure climate-risks more effectively in its portfolio.
Latin America is likely to face a long, tough road ahead, with already indebted countries exposed to higher levels of instability and social unrest. Yet, despite current disruptions to supply chains, the networks exist in the region to bring major players to the table, harnessing knowledge and the power of markets to guide growth by means of a sustainable energy transition. Not doing so will only expose greater vulnerabilities to climate risks and eventual stranded assets, with cleaner, cheaper sources of energy becoming a missed opportunity.
Renewables Could Drive Recovery in Latin America
Countries in Latin America did not feel the effects of the COVID-19 pandemic until several weeks after Europe and the U.S., but the impacts of the coronavirus when it arrived were swift on the region’s economy. The United Nations in a policy brief in July said “COVID-19 will result in the worst recession in the region in a century, causing a 9.1% contraction in regional [gross domestic product] in 2020.” That contraction had analysts looking at what could drive the region’s recovery from the pandemic, and most agreed with what the U.N. said in that policy brief—that Latin American countries should begin “fostering sustainable industrial and technological policies, including measures to encourage a low-carbon growth path [and] promote the transition to renewable energy.” The brief said economic development should focus on “strengthening domestic technological capabilities, particularly in the digital and green energy sectors.”
Fiona Clouder, the UK COP26 (Conference of the Parties) regional ambassador for Latin America and the Caribbean, in a recent webcast said the region’s recovery needs to focus on clean and sustainable power, led by renewable energy. The webcast, co-hosted by the International Renewable Energy Agency and the Latin America Energy Organization, and titled “Accelerating Latin America’s Energy Transformation: RE and Economic Recovery,” discussed the importance of low-carbon energy policy to securing stable, long-term prosperity across regional economies. “In our changing world, building a green recovery and a sustainable future is even more important,” Clouder said. “With vision, ambition, and natural resources, countries in Latin America are well-placed to transition to low-carbon economies, using renewable energy as part of that transformation.”
Several Latin American countries have developed renewable energy goals. Corporate power purchase agreements (PPAs) for renewable energy, with businesses buying electricity directly from independent generators instead of from a utility, have been popular. Such deals had a threefold increase in 2019, according to Atlas Renewable Energy, which recently announced it has signed a large-scale solar PPA in Brazil with multinational company Dow. The need for more decentralized power generation, including renewable power, in Latin America has been highlighted in recent years. Many countries in the region share a central, hundreds-of-miles-long power grid. As a result, a disruption in one country can affect other countries within the region. In September of last year, the failure of a supply line in Honduras caused a full blackout in that country and in Nicaragua, and partial outages in El Salvador and Guatemala. Costa Rica experienced a nationwide power outage in 2017 as a result of a downed power transmission line in Panama.
Glenfarne Group, a New York-based industrial owner and operator dedicated to the development, construction, and operation of energy and infrastructure assets across the investment-grade Americas, has had a firsthand look at how the pandemic has played out for the energy sector in Latin America. Bryan Murphy, who runs the Latin America side of business for Glenfarne as president and CEO of its subsidiary, Prime Energia, told POWER that while “COVID has had an effect everywhere in the world, when we were shutting things down in the United States, it hadn’t yet reached Latin America.” Murphy said his company has “had to rethink how we operate, certainly with personnel, ensuring we keep employees happy, safe, and healthy.” Murphy said the company’s focus remains on “grid stability and renewables,” even with lower demand for electricity due to the pandemic. “I don’t think renewables have a special place in the economic recovery in Latin America, but renewables are an important part of the recovery moving forward, the same as any other industry helping the economy recover,” Murphy said. “COVID has been an unfortunate circumstance, but our fundamental view of the grid and how we’re going to play a role in that has not changed. We’ve continued to push forward investments in the grid stability and renewables space, and we’re going to continue to grow in those areas.
“Over the last four years, Costa Rica has generated more than 95% of its domestic electricity from renewable energy,” said Matt Schultz, CleanSpark’s chairman. “In 2018, nearly 75% of all national renewables came from hydropower. Recent drought conditions have threatened the consistency of that supply, and the country has been more reliant on wind production. This CleanSpark-powered system utilizes proprietary forecasting, driven, not only by the end-user’s energy consumption behaviors and utility rates, but a multitude of other factors, including forecasted weather patterns.” CleanSpark in August announced a strategic alliance with Costa Rica’s Sunshine Energy Corp. (Figure 1), where the Costa Rican company will have the exclusive use of the Microgrid Value Stream Optimizer license, a software for energy models. Barajas cited Costa Rica as one of the “countries that are poised to bounce back the quickest” from the pandemic, because it has “a long-term policy promoting renewable energy development,” and has a goal to produce 100% of its power from renewable resources. “The positive thing is, with a large part of your generation portfolio being renewable, you are energy independent, and at the end of the day it is critical for these economies that are driven by manufacturing, Manufacturing sector needs more certainty in energy costs than that provided by a reliance on fossil fuels for power generation.
Costa Rica project “represents the second project and first large-scale deployment of our mPulse software and controls in Costa Rica. As part of our plans to expand internationally we have identified significant opportunities in Latin America. Costa Rica and Mexico are the first countries we are targeting, with plans to expand to the Brazilian and Panama market in 2021.” Development, even large-scale utility projects will drive the investment in power generation across the region, even during the period of lower energy demand due to the pandemic. “You can build to suit the existing demand today, and then as demand grows, add on to the existing facility. Grow into your power supply.
A ‘Green New Deal’ for Central America would present business opportunities for renewable power generators
Recently there has been a great deal of interest in a ‘Green New Deal’ for the United States. It is seen to solve pressing environmental, employment and economic problems with a single comprehensive plan. Modeled on Roosevelt’s New Deal, which created jobs, invested in large infrastructure projects, and pulled the US out of the Great Depression, the Green New Deal is a modern version of that program, but with green energy investments, 21st century job training, and deficit reduction as the key components.
A similar program makes even more sense for Central America. Second only to hydro power, Central America uses imported fossil fuel to generate electricity with the attendant high prices, high carbon emissions, and lack of investment in local infrastructure and job creation. Every country in the region is a net importer of fossil fuels, which makes both personal and government spending highly dependent on international fuel prices. Additionally, firewood remains a major source of fuel for households with the resulting environmental and health impacts. A Green New Deal for Central America (GNDCA) would address many of these environmental, employment and economic issues, while building on the success of the existing regional electricity market, Mercado Eléctrico Regional (MER), and the recently completed regional interconnection system, Sistema de Interconexión Eléctrica de los Países de América Central (SIEPAC).
To date, MER/SIEPAC has been focused on electricity distribution. SIEPAC connects the electrical distributions systems of Panama, Costa Rica, Nicaragua, Honduras, El Salvador, and Guatemala, and provides power to more than 35 million consumers. It has been a reliable distributions system, integrating local grids into a larger regional market, enabling more efficient dispatch from the members’ generation systems, and providing more reliability across the region. It has also drawn significant foreign investment into the region.
Apeneca, El Salvador. Credit: Donald Green
What is needed now is a program that extends the success of MER/SIEPAC into the production sector. This should include both small scale solar as well as the development, financing, and implementation of large scale solar, geothermal, and wind energy projects. Central America has significant natural resources in all of these areas, but until SIEPAC, only small fragmented markets for energy producers. Now, with a much larger, more homogeneous market, the region should be significantly more attractive to energy producers.
Small-scale solar growth can be stimulated through a range of proven tax incentives and feed in tariffs, which would not only result in distributed energy generation, but also would drive job creation in the construction, installation, financial services, and support sectors. Utility scale projects would expand the successful sourcing of investments from the existing NGOs and international development bank sources, to include investments from manufactures, private banks, and private investment funds. These projects should be done at both the country and regional level. They would drive skills training and employment opportunities for the green jobs of the future. They would also decrease the reliance on foreign fossil fuels, reducing carbon emissions and other negative environmental impacts.
The ultimate step would be to extend the system to include the service sector, further strengthening the regional energy market through deeper integration and additional development of a single regional, rather than multiple local, markets. The larger market would also allow for specialization and new business models.
These initiatives would require additional regulatory, governmental, and technical integration, resulting in a more integrated energy market that would deliver more energy access and jobs to the people of Central America. This larger, more comprehensive system, with capabilities in production, distribution, and services would result in a robust regional electrical market serving a population similar to that of California, giving it the scale and capabilities necessary to compete in the neighboring electric energy markets of Mexico and Columbia. Additionally, the extension into production will let local, country, and regional competition flourish, resulting in better service and lower prices for consumers. And lower prices will have beneficial secondary effects including more accessibility, less use of harmful carbon based fuels, and an economy less susceptible to international energy prices. The investments in regional infrastructure will drive job creation and energy independence.
Central America’s environmental, employment and economic challenges are well known. A Green New Deal for Central America that extends the success of MER/SIEPAC from energy distribution to energy production and services, creating a much larger, comprehensive, and competitive regional energy market, would drive the capital investment, job training, and environmental improvements needed to solve many of these challenges.
The World’s 10 Most Beautiful Solar Farms
- Monte Plata Solar Project, Dominican Republic
Nestled in the tropical greenery, the Monte Plata solar farm packs a whopping 69 MW, offsetting approximately 70,000 tons of carbon dioxide and powering 50,000 homes. It’s the largest solar farm in the Caribbean and consists of 270,000 solar panels.
- Sangju City, South Korea
On the Jipyeong Reservoir in Gyeongsang Bukdo Province, South Korea, are two 3 MW floating solar farm facilities (one shown above). Due to Korea’s relatively small land size, making use of the reservoir surfaces allows the country to increase solar capacity without significantly impacting the land nearby. As for its impact on aquatic ecosystems, the developer maintains that the floating farm decreases evaporation and creates a conducive environment for marine life.
- Crescent Dunes, Nevada, USA
What’s with this unique design, you ask? This Nevada solar farm utilizes concentrated thermal solar power (CSP) instead of panels that transform sunlight directly into electricity. The spiral arrangement of mirrors captures rays from the blazing desert sun and directs them to a center tower that contains molten salt. This salt is then used to heat water and power steam turbines. To get a better understanding of the sheer scale of this project, one must realize that each of those (seemingly) little mirrors is 37 feet wide and 24 feet tall…and there are over 10,000 of them. The tower in the center is 640 feet high. A project of this magnitude provides enough electricity for 75,000 local homes.
- Datong, China
The above photo of a panda-shaped solar farm in China was heavily circulated around social media, but it’s actually an artist’s rendition of the project. We still think the actual photographs are pretty cute, and love that the company is using their solar pandas to help educate Chinese youth about the importance of renewable energy. While many associate China with smog and pollution, forward-thinking policies from Beijing have put the country head and shoulders above the rest of the world in installed solar capacity.
- Waianae, Oahu, Hawaii, USA
Eurus Energy, a Tokyo-based renewable energy company, unveiled this 27.6 MW project in Waianae, on the Hawaiian island of Oahu, earlier this year. The island state has pledged to get all of its energy from renewable sources by 2045. This initiative will not only help the environment, but it will also save Hawaii an estimated $3 billion a year that is typically spent on oil imports.
- Andalusia, Spain
The Andasol Solar Power Station in Andalusia, Spain, is also an example of concentrated solar power (CSP) technology, but unlike the Crescent Dunes plant, this one utilizes parabolic troughs rather than a central tower. Each trough (or row) has a tube containing extremely hot fluid (over 1,000° F) in the middle, which serves the same purpose as the molten sand in the tower at Crescent Dunes. The sun’s rays are bent inward toward the tube, ultimately heating water to power steam turbines. The Andasol station is the first of its kind in Europe, and construction began in 2006. It supplies electricity to approximately half a million Spanish residents.
- Broken Hill, Australia
The Broken Hill Solar Plant of Australia provides electricity to approximately 20,000 Australians in the outback. The city of Broken Hill, which can be seen in the background, directly benefits from this clean energy generation, as do several local mines.
- Mojave Desert, California, USA
Much like the Crescent Dunes facility in Nevada, the Ivanpah solar project in the Mojave Desert utilizes concentrated solar power (CSP) technology. While this desert oasis does make our list in terms of beauty, it wouldn’t top any lists in terms of efficiency or output: the farm must burn a large amount of natural gas each morning to commence operation, and output levels have been lower than expected. However, the farm has consistently increased its annual production since its opening in 2014.
- Oxford, Massachusetts, USA
Sure, we might be a little biased: the Barrett Street solar project in Oxford, Massachusetts, was one of the solar projects Solstice helped to fill this year! But looking at it nestled in the autumn foliage, we daresay it has every right to be included on this list of beautiful solar farms.
- Postmasburg, South Africa
Solar is booming in Africa. Rural areas which have never had access to electricity are now installing off-grid solar energy systems to serve their communities, allowing them to ‘leapfrog’ past traditional, fossil fuel grids and straight to renewable, clean technology. This 96 MW solar farm is located in South Africa, and claims Google as one of its financial backers.
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Solar Systems in United States & Latin America